WAEC Financial Accounting 1994 Question 21

Question 21

Depreciation

A plant which costs ₦1,000 and has a residual value of ₦125 is depreciated at 20% per annum. Using the diminishing balance method, what is the amount of depreciation for the second year?

A.₦128
B.₦140
C.₦160
D.₦175
E.₦200.

Show the answer and explanation

Answer: C (₦160)

Explanation

Year 1: 200, leaving 800; year 2: 20% × 800 = ₦160.